Refinery breakdowns from Kansas to Texas are spurring speculators in the futures market to bet on rising gasoline prices, but there’s no evidence of supply problems at the pump as the Labor Day holiday approaches.
Hedge funds raised net-long positions by 13 percent in the week ended Aug. 12, Commodity Futures Trading Commission data show. The wagers slumped 56 percent in the previous five weeks, while gasoline futures dropped 10 percent since the Memorial Day holiday on May 26, the traditional start of the driving season.
Bets on rising prices reached this year’s high in late April on speculation that peak summer demand would reduce supply. Inventories expanded to a four-month high in July, as refineries produced a record amount of fuel and consumption was stuck at the lowest seasonal level since 2012. The outages are unlikely to stem a decline in prices, according to AAA.
“The refinery outages spurred some buying,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone on Aug. 15, “It’s certainly still a bearish market. The demand environment is not great, and there is plenty of gasoline coming into the market. We remain well-supplied.”
Regular gasoline at the pump, averaged nationwide, sank to $3.454 a gallon Sunday, the lowest level since Feb. 28, according to AAA, the largest U.S. motoring group. The peak driving season typically runs through Labor Day, which falls on Sept. 1 this year.
In the Kansas City area, the average price for a gallon of unleaded ranged from $3.289 on the Missouri side of the state line to $3.364 on the Kansas side, according to AAA data on Monday. That was down about 8 cents a gallon from the same period a year ago.
“Refineries are making more than enough gasoline to meet domestic demand, which has helped push gas prices to the lowest level for this time of year since 2010,” Michael Green, a AAA spokesman, said by e-mail. “It seems unlikely that an increase in road trips over Labor Day weekend would reverse this summer’s gas price decline based on current conditions.”
A fluid catalytic cracker at Exxon Mobil Corp.’s 344,600- barrel-a-day Beaumont, Texas, refinery was shut after a malfunction July 25. CVR Energy Inc. closed the 115,000-barrel- a-day Coffeyville refinery in Kansas after a July 29 fire.
U.S. refineries operated at 91.6 percent of capacity in the week ended Aug. 8, down from 93.8 percent in July, according to the Energy Information Administration. Gasoline production was 9.52 million barrels a day, the most for this time of year since since EIA began weekly data in 1982.
Demand averaged 9.02 million barrels a day in the four weeks ended Aug. 8, the lowest seasonal level since 2012, according to the EIA, the Energy Department’s statistical arm. Inventories rose to 218.2 million barrels as of July 25, the most since March.
“Stocks are ample, output is rising and demand will see structural decline for years.” analysts at Bank of America Corp. including Francisco Blanch, the bank’s head of commodities research in New York, said in a report Aug. 12.
Global refining capacity rose to a record 94.9 million barrels a day by the end of 2013, according to BP Plc’s Statistical Review of World Energy. U.S. capacity reached a record 17.9 million this year, according to the EIA.
“Too many refiners and too little demand, and that’s the problem,” Robert Campbell, the New York-based head of oil products research at Energy Aspects Ltd., a London-based research firm, said by phone Aug. 14. “Refining capacity worldwide continues to grow rapidly relative to demand.”